Energy & Water Development Corp - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2019

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 000-56030

EUROSPORT ACTIVE WORLD CORP.

(Exact Name of Registrant as Specified in Its Charter)

3250 Mary Street, #303, Miami, Florida 33133

(Address of Principal Executive Offices, including Zip Code)

Tel No.: 305-517-7330

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ    No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ¨    No þ

The number of shares outstanding of the registrant’s classes of common stock as of August 12, 2019 was 92,792,483 shares.

INDEX

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The information contained in this Report, including in the documents incorporated by reference into this Report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Report are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with our financial statements and the related notes included in this Report.

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PART I.   FINANCIAL INFORMATION

ITEM 1.   FININCIAL STATEMENTS

Eurosport Active World Corp.

Condensed Consolidated Balance Sheets

See accompanying notes to the condensed consolidated financial statements (unaudited).

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Eurosport Active World Corp.

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes to the condensed consolidated financial statements (unaudited).

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Eurosport Active World Corp.

Condensed Consolidated Statement of Changes in Stockholders’ Deficit

See accompanying notes to the condensed consolidated financial statements (unaudited).

3

Eurosport Active World Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to the condensed consolidated financial statements (unaudited).

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Eurosport Active World Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2019 and December 31, 2018

Note 1. Incorporation and Nature of Operations

Eurosport Active World Corp. (the “Corporation”, “Company” or “EAWC”), was incorporated under the laws of the State of Florida on December 12, 2007.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements (unaudited) include the accounts of Eurosport Active World Corp. and its wholly-owned subsidiaries Powermax Energy, Powermax Green Technologies, GEM, Swiss Green Solutions and African Sunlight and have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Eurosport Active World Corp. for the fiscal year ended December 31, 2018 have been omitted.

Certain reclassifications have been made in Fiscal 2018 results to conform to the presentation used in Fiscal 2019.  These reclassifications had no effect on the reported results of operations of the Company.

Loss Per Common Share

The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method. When a loss from operations exists, potential common shares are excluded from the computation of diluted EPS because their inclusion would result in an anti-dilutive effect on per share amounts.

For the six months ended June 30, 2019 and 2018, an aggregate of 2,200,000 stock options to purchase shares of common stock were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.

In addition, as discussed more fully in Note 6, convertible note holders have the option of converting their loans into common shares commencing on February 19, 2019, the completion of an approved S-1 registration of its common shares. Some lenders were also granted the right to purchase additional shares, however these rights expired after one year from the date of the note. The above conversion feature represents a total potential if all conversions are exercised of 2,266,000 and 5,347,350 shares at June 30, 2019 and December 31, 2018, respectively. In addition, the note holders have begun exercising their conversion options and as of June 30, 2019, had converted $487,824 of debt into 4,611,350 common shares, leaving options for 2,200,000 potential shares unexercised. The potential shares from both the conversion feature and the rights to purchase additional shares were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.

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Eurosport Active World Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2019 and December 31, 2018

Note 3. Recently Issued Accounting Standards

Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Corporation’s future consolidated financial statements. The following are a summary of recent accounting developments.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and compatibility among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specific scope exceptions. The guidance in this update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of ASU No. 2016-02 will have no material impact on our financial statements.

In June 2018, the FASB issued ASU 2018-07, “Improvements to Non-Employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments granted to non-employees for goods and services by expanding the scope of ASC Topic 718, “Compensation – Stock Compensation”. The guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. The Company does not believe that the adoption of ASU 2018-07 will have a significant impact on the Company’s consolidated financial statements.

Note 4. Going Concern

The Corporation has yet to commercialize its products and consequently has generated no revenue, incurring operating losses since inception (June 24, 2005) totaling $11,457,940 at June 30, 2019. During the six months ended June 30, 2019, the Corporation incurred net losses of $441,636. The Company also incurred a working capital deficit of $3,553,140 at June 30, 2019.

These factors raise substantial doubt regarding the Corporation’s ability to continue as a going concern. The ability of the Corporation to continue as a going concern depends upon its ability to obtain funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.

In the event the Corporation does not generate sufficient funds from issuance of common stock, debt financing or purchase orders, it may be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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Eurosport Active World Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2019 and December 31, 2018

Note 5. Related Party Transactions

Due to officers

Amounts due to officers as of June 30, 2019 and December 31, 2018 are comprised of the following:

Unsecured advances due to officers represent unreimbursed Corporation expenses paid by the officers on behalf of the Corporation. These advances are non-interest bearing and are due on demand.

Accrued salaries represent amounts accrued in accordance with the employment agreements for the Corporation’s Chief Executive Officer and Chief Operating Officer (see note 7).

Due to/from affiliate

Effective January 2017 the Company engaged EAWC Tecnologias Verdes, SA (“EAWC-TV”) to provide its management services, including disbursement processing for $25,000 per month totaling $300,000 annually. During the first quarter of 2017 and prior, EAWC-TV had been a borrower from EAWC. But starting in the second quarter of 2017 EAWC-TC began repaying EAWC. The balance due to at December 31, 2017 had decreased to $116,643. In April 2018, EAWC-TV completed the repayment of all funds previously borrowed from EAWC and continued to remit its own funds to EAWC suppliers on behalf of EAWC and in satisfaction of EAWC obligations to its suppliers. During the year ending December 31, 2018, EAWC-TV provided $300,000 of services plus $3,620 net in interest and remitted $170,483 to vendors in satisfaction of EAWC obligations. EAWC also remitted $20,000 to EAWC-TV. The balance due to EAWC-TV by EAWC at December 31, 2018 was $298,313.

During the six months ended June 30, 2019, EAWC had paid $120,480 to EAWC-TV and EAWC-TV charged EAWC $150,000 in monthly management fees. In addition, EAWC-TV had funded and paid on behalf of EAWC $31,122 to EAWC vendors and charged EAWC $9,971 in interest. The balance due to EAWC-TV by EAWC at June 30, 2019 was $290,202.

Note 6. Convertible Loans Payable

From December 2015 through December 2018, the Company issued several convertible notes to an aggregate of 11 note holders. These convertible loans are due on demand, unsecured, have no maturity date and are generally non-interest bearing although a few of the notes provide for 2% interest. The loan holders have the option to convert the loans into common stock at conversion prices ranging from $1.00 to $.05 per share. The conversion feature is exercisable for one year after the issuance date of the note. For older notes with expired conversion options, management granted an extension as requested.

The debentures issued in 2018 and prior were determined to be solely debt without an equity portion as the Company has determined that these conversion options issued are not beneficial. As such, these convertible debentures have no equity portion and are presented as loans payables in the financial statements. The transaction price for these loans payable reflects the fair value of the instruments issued.

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Eurosport Active World Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2019 and December 31, 2018

Note 6. Convertible Loans Payable (continued)

During the six months ended June 30, 2019, the Company issued two convertible note payable in the amount of $98,000 net of unamortized debt discount of $57,551. The convertible notes payable are due on February 19, 2020, accrue interest at 0-2% per annum and are convertible into shares of the Company’s common stock at $0.05 per share which is a discount to the market price on the date of the issuance (beneficial conversion feature). Amortization expense related to debt discount for the six months ended June 30, 2019 and 2018 was $40,449 and $0, respectively.

During the six months ended June 30, 2019, by mutual agreement between the Company and the debt holders, an aggregate of $487,824 of outstanding convertible debt was converted into 4,611,350 common shares of the Company at a conversion price ranging from $0.10 - $1.00 per share. As of June 30, 2019 and December 31, 2018, the Company had outstanding convertible loans of $139,449 and $586,825, respectively, net of unamortized loan discount of $57,551 (2019) and $0 (2018).

Note 7. Stockholders’ Deficit

On November 1, 2016, SWATE and the Corporation executed a Termination of its International Services Contract effective from December 31, 2016. The termination cited default of important obligations, in particular the payment within an agreed period of time and the person responsible for the Service Provider, would no longer be employed. It was further agreed that the outstanding balance of $712,070 would be settled with the issuance of 712,070 restricted common shares of the Company. EAWC issued 712,070 shares on February 2, 2018, which were fair valued at $85,448. The difference of $626,622 was accounted for as a capital contribution from a related party.

During the six months ended June 30, 2019 the Company sold 211,200 common shares to investors at $0.16 - $1.00 per share for total proceeds of $43,200.  The Company also issued 4,611,350 common shares for conversion of debt as discussed in Note 6.  Additionally, the Company issued 56,000 conditional shares to existing note holders at $1.00 per share, towards settlement of their convertible notes. However, these note holders have not completed the conversion process into 56,000 common shares, pending the resolution of required documentation.  Given the conditional nature of their documentation, these shares have been reported separately from the group of converting notes and recorded at their par value of $56.

Note 8. Stock Option Plan

On January 2, 2012, the Corporation’s Board of Directors approved the creation of the 2012 Non-Qualified Stock Option Plan (the “2012 Plan”). The 2012 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to 5,000,000 shares of the Corporation’s common stock.

A summary of information regarding the Corporation’s common stock options outstanding is as follows:

The above outstanding options were granted on January 1, 2012, to a former Corporation’s executive. The options vest 20,000 options per month with 2,200,000 being vested and exercisable at June 30, 2019. During the six months ended June 30, 2019 and 2018, the Corporation did not recognize any stock-based compensation expense as the options were fully vested at December 31, 2016.

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Eurosport Active World Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

June 30, 2019 and December 31, 2018

Note 9. Commitments and Contingencies

Commitments

Employment Agreements

The Corporation entered into employment agreements with its Chief Executive Officer, Mr. Ralph Hofmeier, and its Chief Operating Officer, Ms. Irma Velazquez (collectively the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the Corporation will pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the Corporation’s Board of Directors. The Employment Agreements each has initial terms of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew.

Lease

On March 1, 2016, the Corporation leased US office space at 3250 Mary Street, Suite 303 Coconut Grove FL 33133 USA from its counsel for monthly rent payments of $300 on a month to month basis. Rent expense for the six months ending June 30, 2019 and 2018 amounted to $1,800 and $1,800, respectively.

Contingencies

From time to time, the Corporation may be a defendant in pending or threatened legal proceedings arising in the normal course of its business. While the outcome and impact of currently pending legal proceedings cannot be predicted with certainty, the Corporation’s management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on its consolidated operating results, financial position or cash flows.

Litigation

Norwood - Action proceeding on concluded litigation, Case Number 10-58982 CA 09 – Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. An Agreed Stipulation for Final Judgement was entered into by the plaintiff, Nick Norwood and the Company and Ralph Hofmeier in November 2013 in the total amount (as of that date) of $107,872, which has been entered in the public records against the Company. This remains the current situation.

CocoGrove – The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company in July 2010 for $84,393 plus 6% interest. There have been no efforts to seek collection of this judgement. Management intends to settle this judgement when it is in a financial position to make a payment.

Note 10. Subsequent Events

On August 7, 2019, the Company entered into a $110,000 8% convertible note to provide interim financing. The note matures on August 7, 2020. The note is convertible at the option of the holder, at a price for each share of common stock equal to 70% of the lowest closing bid price of the common stock as reported on the OTCQB exchange for 20 prior trading days from the day of Notice of Conversion.  

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ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

INTRODUCTORY STATEMENT

The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

RESULTS of OPERATIONS

Results of Operations for the Six Months ended June 30, 2019 Compared to the Six Months ended June 30. 2018

Revenue

For the six months ended June 30, 2019 and 2018, we generated no revenue.

General and Administrative Expense

General and administrative expense decreased by $55,130 to $391,043 for the six months ended June 30, 2019 from $446,173 for the six months ended June 30, 2018.

The decrease in general and administrative expenses was primarily due to decreases in the following categories:

The foregoing decreases were partially offset by an increase of:

Other Expense

Other expense increased $129,920 from $79,327 income (2018) to $50,593 expenses (2019) primarily as a result of the following:

Net Loss

Net Loss increased by $74,790 to $441,636 for the six months ended June 30, 2019 from $366,846 for the six months ended June 30, 2018. This increase was attributable to the net increases and decreases as discussed above.

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Results of Operations for the Three Months ended June 30, 2019 Compared to the Three Months ended June 30. 2018

Revenue

For the three months ended June 30, 2019 and 2018, we generated no revenue.

General and Administrative Expense

General and administrative expense decreased by $63,525 to $182,019 for the three months ended June 30, 2019 from $245,544 for the three months ended June 30, 2018.

The decrease in general and administrative expenses was primarily due to decreases in the following categories:

The foregoing decrease was partially offset by increases of:

Other Expense

Other expense increased $126,468 from $80,771 income (2018) to $45,697 expense (2019) primarily as a result of the following:

Net Loss

Net Loss increased by $62,943 to $227,716 for the three months ended June 30, 2019 from $164,773 for the three months ended June 30, 2018. This increase was attributable to the net increases and decreases as discussed above.

LIQUIDITY and CAPITAL RESOURCES

We had $0 cash and a working capital deficit of $3,553,140 at June 30, 2019. Our operating and capital requirements in connection with supporting our operations will continue to be significant. Since inception, our losses from operations and working capital requirements have been satisfied through the deferral of payment for services performed by our founders and related parties discussed more fully below.

We have sustained operating losses since our inception. At June 30, 2019, we had an accumulated deficit of $11,457,940. The Company cannot predict how long it will continue to incur further losses or whether it will ever become profitable as this is dependent upon the reduction of certain expenses and success in obtaining project contracts, among other things. These conditions raise substantial doubt about the entity’s ability to continue as a going concern.

We have satisfied our cash and working capital requirements in the six months ended June 30, 2019, through the support of an affiliate who paid our operational expenses on our behalf, the issuance of convertible loans and the sale of our stock. During the six months ended June 30, 2019, the Company sold 211,200 common shares ranging at $0.16 - $1.00 per share or $43,200 and issued $98,000 in convertible loans. The holders of the convertible loan instrument have the option to convert these loans into common stock at a conversion price of $0.05 per share up to one year from the note issuance.

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Comparison of Cash Flows for the Six Months Ended June 30, 2019 (2019) and June 30, 2018 (2018)

Cash Flows from Operating Activities

We used $141,200 of cash in our operating activities in 2019 compared to $242,046 used in 2018. The decrease in cash used of $100,846 was primarily due to $94,040 of cash provided from changes in working capital components as a result of increases in accounts payable and accrued expenses. This increase in cash provided was partially offset by a $4,807 fund usage as a result of the net loss adjusted by non-cash items in the current period compared to the same period one year ago.

Cash Flows from Investing Activities

We received $0 cash provided by our investing activities in 2019 compared to $155,790 provided in 2018. The decrease of $155,790 of cash provided is due to no investing activities in the current period compared to the same period one year ago.

Cash Flows from Financing Activities

We received $141,200 and $86,256 in cash provided from financing activities in 2019 and 2018, respectively. The increase of $54,944 is due to the increase in financing though issuance of convertible loans and the sale of common shares in the current period compared to the same period one year ago.

Financial Position

Total Current Assets – At June 30, 2019 the Company had $1,875 representing advance payments for services.

PLAN OF OPERATION AND FUNDING

We have no lines of credit or other bank financing arrangements. Until we begin to generate revenues and positive cash flow, which there is no assurance, we expect that working capital requirements will continue to be funded through affiliate loans and/or further issuances of other securities. There is no assurance that we will be able to meet our working capital requirement from these possible sources. Additional issuances of equity or convertible debt will result in dilution to our current shareholders. We may not be able to secure the additional financing necessary to commercialize our products and execute our business strategy, at terms that are acceptable to us.

Our mission is to provide sustainable water production design and already commercialized systems as well as energy design and systems based on high efficiency and renewable sources, and also smart grid and storage solutions. Through a combination of the best design and configuration of AquaTech, EnergyTech and waste management assisted solutions and technologies, we believe that it is possible to create a completely self-sufficient energy generation and water production system, which can be used at the same time to meet the potable water requirements as well as the electrical energy needs of businesses, communities and entire States, like California in USA and or Cape Town in South Africa.

EAWC seeks to promote green technology solutions through commissioned-based distributers and agents worldwide. EAWC anticipates using Made in Germany Green Tech, Swiss and US technologies such as: atmosphere water generators (AWGs), CO2-free energy production (steam energy generators), plasma-assisted gasification and sterilizations systems, solar-powered water purification systems, as well as those in solar and wind energy solutions which we may, when our financial condition permits, further develop ourselves.

Today we believe we have potential technology partners, technology transfer agreements and technology representation agreements in place relating to aspects of renewable energy and water supply and we believe one of our key unique selling features and capabilities is this relationship. We believe that one of our key unique selling features and capabilities is the combination of the different disciplines of water, energy and waste management.

Revenue would be generated by the sales of Engineering and Technical Consultancy Services, sales of various identified technologies, royalties from the sales of energy and/or water in certain projects.

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MATERIAL COMMITMENTS

Employment Agreements

The Company entered into employment agreements with Mr. Hofmeier, its President, Chief Executive Officer and Chairman of the Board, and Ms. Velazquez, its Chief Operating Officer and Vice-Chairman (together, the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the company agreed to pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the company’s Board of Directors. Each Employment Agreement has an initial term of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew.

OFF-BALANCE SHEET ARRANGEMENTS

None

GOING CONCERN

The Company has yet to commercialize its products and consequently has generated no revenue, incurring operating losses since inception (June 24, 2005) totaling $11,457,940 at June 30, 2019. During the six months ended June 30, 2019, the Corporation incurred net losses of $441,636. The Company also incurred a working capital deficit of $3,553,140 at June 30, 2019.

These factors raise substantial doubt regarding the Corporation’s ability to continue as a going concern. The ability of the Corporation to continue as a going concern depends upon its ability to obtain funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.

In the event the Corporation does not generate sufficient funds from issuance of common stock, debt financing or purchase orders, it may be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are set forth in Note 2 to the condensed consolidated financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

We do not expect the adoption of recently issued accounting pronouncements as discussed in Note 3 to have a significant impact on our results of operations, financial position or cash flow.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide the information under this item.

ITEM 4.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) as of December 31, 2018. This evaluation was carried out by our Principal Executive Officer and our Principal Finance Officer. Based on that evaluation, our Principal Executive Officer and our Principal Finance Officer concluded that, as of June 30, 2019, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of June 30, 2019, our disclosure controls and procedures were not effective:

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and limited reviews (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the six months ended June 30, 2019 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II.   OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Norwood - Action proceeding on concluded litigation, Case Number 10-58982 CA 09 – Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. An Agreed Stipulation for Final Judgement was entered into by the plaintiff, Nick Norwood and the Company and Ralph Hofmeier in November 2013 in the total amount (as of that date) of $107,872, which has been entered in the public records against the Company. This remains the current situation.

CocoGrove – The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company in July 2010 for $84,393 plus 6% interest. There have been no efforts to seek collection of this judgement. Management intends to settle this judgement when it is in a financial position to make a payment.

ITEM 1A.   RISK FACTORS

We are a smaller reporting company and are not required to provide the information under this item.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company issued the following common shares during the six months ended June 30, 2019:

·

211,200 common shares, for proceeds of $43,200 to pay operational expenses. The shares were issued pursuant to an exemption from registration pursuant to Section 4(a)(2) of the securities Act of 1933 (the “1933 Act”).

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.   MINE SAFETY DISCLOSURES

N/A

ITEM 5.   OTHER INFORMATION

None

ITEM 6.   EXHIBITS

EXHIBIT INDEX

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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